?url_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Adc&rft.relation=https%3A%2F%2Fpure.iiasa.ac.at%2Fid%2Feprint%2F4554%2F&rft.title=Medium-Term+Scenarios+for+the+Finnish+Pulp+and+Paper+Industries&rft.creator=Ronnila%2C+M.&rft.description=This+report+analyzes+the+competitiveness+of+the+pulp+and+paper+industry+in+Finland+as+well+as+potential+future+changes+in+its+structure+in+response+to+changes+in+factors+affecting+the+business+environment.+Examples+of+such+factors+include+development+of+market+demand%2C+availability+of+raw+materials%2C+and+production+capacity+growth+in+competing+countries.+Feasibility+of+alternative+capacity+projects+is+studied+using+a+spatial+partial+equilibrium+model+that+accommodates+firm+level+and+regional+details+of+the+Finnish+forest+sector.+Alternative+competition+hypotheses%2C+perfect+competition+and+Cournot+oligopoly%2C+are+applied+to+assess+the+sensitivity+of+the+results+to+the+choice+of+market+hypothesis.+Also%2C+a+set+of+hypothetical+mergers+is+explored+as+potential+future+developments.+The+model+structure%2C+the+data+used%2C+and+the+results+of+the+alternative+scenarios+are+reported.+In+addition+to+the+scenario+outcomes%2C+we+derive+the+following+results+that+we+consider+useful+in+future+research.+%0D%0A%0D%0AFirst%2C+our+results+suggest+that%2C+with+the+current+structure+of+the+European+paper+industry%2C+it+is+relatively+safe+to+adhere+to+the+perfect+competition+hypothesis+when+modeling+the+use+of+existing+capacity.+To+model+capacity+expansion%2C+further+empirical+work+elucidating+an+accurate+behavioral+form+is+required%2C+because+the+competition+pattern+significantly+contributes+to+the+investment+behavior+of+the+leading+firms+and+hence+to+overall+developments+in+the+industry.+%0D%0A%0D%0ASecond%2C+an+interesting+finding+was+that+when+firms+realize+the+price+effect+of+their+output+but+do+not+consider+their+influence+on+their+rivals'+behavior+the+industry+that+is+initially+composed+of+several+heterogeneous+firms+converges+toward+a+more+homogenous+size+distribution+when+the+same+technology+is+available+to+all+the+firms+in+the+market.+This+is+explained+by+the+fact+that+if+the+industry+lacks+the+ability+to+coordinate+investments%2C+the+large+firms+have+less+incentive+to+expand+their+capacity%2C+because+the+potential+decrease+in+product+prices+hurts+them+more+than+it+would+hurt+a+small+firm+with+little+initial+capacity.+Mergers+are+a+safe+way+for+large+firms+to+expand+or+maintain+significant+market+share+without+harming+market+prices.+However%2C+our+result+repeats+earlier+presented+conclusions%3A+in+homogenous+product+markets%2C+mergers+do+not+necessarily+provide+the+merged+firms+private+gain+other+than+the+potential+savings+in+fixed+cost.+Instead%2C+an+exogenous+change+in+industrial+structure+can+cause+losses+for+the+merged+firms+if+they+try+to+dominate+the+industry+in+order+to+restrict+output.+However%2C+mergers+increase+concentration%2C+which+facilitates+coordinating+investments.+This+provides+public+good+to+the+entire+industry.&rft.publisher=WP-95-038&rft.date=1995-04&rft.type=Monograph&rft.type=NonPeerReviewed&rft.format=text&rft.language=en&rft.identifier=https%3A%2F%2Fpure.iiasa.ac.at%2Fid%2Feprint%2F4554%2F1%2FWP-95-038.pdf&rft.identifier=++Ronnila%2C+M.+%3Chttps%3A%2F%2Fpure.iiasa.ac.at%2Fview%2Fiiasa%2F2755.html%3E++(1995).++Medium-Term+Scenarios+for+the+Finnish+Pulp+and+Paper+Industries.+++IIASA+Working+Paper.+IIASA%2C+Laxenburg%2C+Austria%3A+WP-95-038+++++